SIDBI is a term also known as Small Industries Development Bank of India. This is a major financial institution in the country that especially provides the needs and requirements of small industries. Let’s discuss more about SIDBI overview, how it works, history, chairman, etc. below:
A government-sponsored financing system known as “systematic financing” is mostly offered to small and medium-sized organizations, business owners, and individual entrepreneurs by local governments and private financial institutions.
Overview of SIDBI:-
This essential financial institution was introduced in 1990, 2 April via an act of parliament. The institution was established with the main objectives and goals of promoting, developing, growing, and financing small-scale industries (SSIs) throughout India. SSIs are also referred to as small, micro, and medium enterprises, they play an important role in the economy of India by contributing heavily to the sectors such as industrial production, export earnings, and employment.
Small and medium-sized businesses, as well as single sole proprietorships, typically face greater difficulties when trying to get loans from private financial institutions since they often have less secure financial and business foundations and are less trustworthy and reliable than larger corporations. Poor small and medium-sized businesses will fail and cause difficulties to lenders and customers, along with losing job opportunities while decreasing the number of workers, if the company surroundings and economy are in a weak state and depart from the comparable rules of the market workers might end up homeless.
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History of SIDBI:-
The creation and introduction of SIDBI was a great and helpful move by the government of India. This was introduced to fulfill the financial needs or requirements and day-to-day challenges faced by small-scale industries (SSIs) in the nation. In the daily lives of SSIs, they face a lot of struggles and problems in getting credit and other additional financial services through banking institutions.
There is a lot of importance and need for SSIs in the country and remembering the importance of SSIs such as economic growth, the Indian government managed to establish an advanced financial institution for the growth and development of SSIs.
Passing all these years and over time SIDBI has increased its operations and established several financial services and products to fulfill the major needs of SSIs and to make the county grow more economically and financially. SIDBI has also partnered with additional government agencies, international businesses, financial institutions, etc to fulfill the aim of promoting the growth and development of SSIs throughout the country and every region or sector of India.
Finance Facilities Offered by SIDBI:-
1. Direct Finance:
– Working Capital Assistance: SIDBI provides funding to meet the short-term operational needs of MSMEs.
– Term Loan Assistance: Long-term financial support for acquiring assets, expanding operations, or modernizing infrastructure.
– Foreign Currency Loan: Assistance in foreign currency for MSMEs engaged in international trade or requiring foreign exchange.
– Support against Receivables: Financing against outstanding invoices to manage cash flow effectively.
– Equity Support: Investment in the equity of MSMEs to strengthen their financial structure.
– Energy Saving Scheme: Financial support to MSMEs implementing energy-efficient measures to reduce operational costs.
2. Indirect Finance:
– Refinance to PLIs: SIDBI extends financial support to Primary Lending Institutions (PLIs) like banks and State Level Financial Institutions to enhance their lending capacity to the MSME sector. This facilitates the flow of credit to MSMEs through an extensive network.
3. Microfinance:
– SIDBI offers microfinance services tailored to the needs of small businessmen and entrepreneurs, enabling them to establish and grow their businesses with small-scale financial assistance.
These finance facilities cater to the diverse financial needs of MSMEs, supporting their growth and development across various sectors of the economy.
Chairman and Managing Director of SIDBI
The chairman of SIDBI is Shri Sivasubramanian Raman. The chairman has a great position within the company, offering strategic and planned leadership to SIDBI to achieve the aim of achieving growth, development, and economic change for SSIs across India.
The responsibilities and duties of the chairman are to implement the initiatives and policies of SIDBI and create strategies to achieve the requirements of SSIs. Also, to make partnerships and collaborations stronger with financial institutions, agencies, and industries.
Direct Finance Loan Schemes Offered by SIDBI:-
| Loan Scheme | Loan Amount | Loan Tenure | Eligibility Criteria |
| SIDBI Make in India Soft Loan Fund for MSME (SMILE) | Minimum loan size – Rs.10 lakh for Equipment Finance and Minimum Loan Size for Others – Rs.25 lakh. | Up to 10 years, including 3-year moratorium | New enterprises in the manufacturing and services sector and existing enterprises undertaking expansion. |
| Smile Equipment Finance (SEF) | Minimum loan amount is Rs.10 lakh | Up to 72 months | MSMEs in existence for at least 3 years and having satisfactory financial position. |
| Loans under partnership with OEM (Original Equipment Manufacturer) | Up to Rs.1 crore | Up to 5 years | MSMEs in existence for at least 3 years and having satisfactory financial position. |
| Working Capital (Cash Credit) | Depends upon the financial ability of the applicant | As per the terms and conditions | MSME units which are existing customers under SIBDI or of other banks. |
| SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED) | Up to 100% of the machinery cost subject to maximum of Rs.1 crore for New to Bank (NTB) customers and up to Rs.2 crore for existing customers of SIDBI. | Up to 2-5 years including moratorium of up to 3-6 months | MSME units with at least 3 years operations with stable sales and cash profits in immediate past 2 years. |
| SIDBI-Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS) | Up to 100% of the machinery cost subject to maximum of Rs.2 crore for New to SIDBI customers and up to Rs.3 crore for existing customers of SIDBI. | Up to 2-5 years including moratorium of up to 3-6 months | MSME units with at least 5 years operations with stable sales and cash profits in immediate past 3 years. |
| Top Up Loan For Immediate Purposes (TULIP) | 30% of existing exposure or 20% of net sales subject to maximum of Rs.2 crore | Up to 5 years including 6-month moratorium | At least 1-year association with SIDBI |
| SIDBI Term-Loan Assistance for Rooftop Solar PV Plants (STAR) | Rs.10 lakh to Rs.2.5 crore | Up to 5 years including 3-6 months moratorium | Proof of 2 years of cash profit and satisfactory financial records |
| SIDBI Assistance to Facilitate Emergency Response Against Coronavirus (SAFE) | Up to Rs.50 lakh | Up to 5 years | For New to bank customer – At least two years of cash profits and account and For existing bank customer – Cash profit in last audited balance sheet and account |
| SIDBI Assistance to Facilitate Emergency Response Against Coronavirus Plus (SAFE PLUS) | Up to Rs.100 lakh | Repayable over 4-month cycle | For New to bank customer – At least two years of cash profits and account and For existing bank customer – Cash profit in last audited balance sheet and account |
| Timely Working Capital Assistance To Revitalise Industries In Times Of Corona Crisis (TWARIT) | Up to 20% of total outstanding loans with SIDBI up to Rs.25 crore as of February 29, 2020 | Up to 4 years including 1 month moratorium | All existing borrower accounts with combined outstanding credit facilities up to Rs.25 crore as of 29.2.2020. |
How SIDBI Works?
In this growing world and technology, SIDBI works by offering financial support and help to small organizations in the nation. SIDBI works on finding out the needs of small businesses and delivers special financial services and products for SSIs to meet their requirements.
For example, if any small business needs funds to expand their business or buy a new machine or equipment, SIDBI shall provide them with a loan.
SIDBI also partners with agencies, banks, and additional financial institutions to ensure that SSIs are getting the help and support they want.
Functions of SIDBI:
1. Refinancing Loans: SIDBI provides refinancing facilities to Primary Lending Institutions (PLIs) for loans extended to small-scale industrial units, ensuring adequate financial support for MSMEs.
2. Bill Discounting and Rediscounting: SIDBI facilitates the discounting and rediscounting of bills, enabling MSMEs to manage their cash flow effectively and access immediate funds against receivables.
3. Expansion of Marketing Channels: SIDBI works towards expanding marketing channels for products of Small Scale Industries (SSI), both domestically and internationally, enhancing their market reach and competitiveness.
4. Financial Services: SIDBI offers financial services such as factoring and leasing to industrial concerns in the small-scale sector, providing them with alternative financing options to support their business operations.
5. Promotion of Employment-Oriented Industries: SIDBI promotes industries that generate employment, particularly in semi-urban areas, to create job opportunities and prevent the migration of people to urban areas.
6. Modernization and Technological Upgradation: SIDBI initiates measures for the modernization and technological upgradation of existing units in the MSME sector, enhancing their productivity and competitiveness in the market.
7. Facilitation of Credit Flow: SIDBI ensures the timely flow of credit, including working capital and term loans, to Small Scale Industries in collaboration with commercial banks, supporting their financial needs for growth and expansion.
8. Co-promotion of State-level Venture Funds: SIDBI collaborates with other entities to co-promote state-level venture funds, facilitating access to equity capital for MSMEs and promoting entrepreneurship at the regional level.
Benefits of SIDBI:-
A Range of Management Assistance
The sustainability of small and medium-sized enterprises is a necessity for the development of lively towns, the stabilization of employment, and the stability of financial grounds for local governments that initiate the delivery of institutional finance.
In addition, there are situations where resources are offered in the form of information, such as guidance on management techniques if institutional financing is a procedure that distributes funds. Having someone trustworthy to talk with is comforting for small enterprises and solo proprietorships that often feel lonely.
Few Obstacles to Inspection
Lower restrictions to loan screening are the main benefits of using institutional loans. In simple terms, the chance of future growth and recovery will guide their helpful decision-making, even for small and medium-sized businesses that are facing challenging business conditions or recently founded start-ups. These decisions rely on the company’s plan and the leadership’s use. There’s a pattern.
The criteria for testing are less strict than those for private financial institutions, the goal of institutional funding and SIDBI is to assist small and medium-sized businesses and startups that may be removed if exposed to market pressures.
Low-Interest Rates
The low-interest rates associated with institutional loans are an additional benefit.
First of all, even in cases where they are required to charge excessive interest rates due to their creditworthiness, the majority of customers are organizations with unstable financial bases and cash flow problems, which will restrict the management of the company. Low-interest loans are often required for most systems, though this differs based on the system.
Aid for Expanding Businesses
As an aspect of their expansion plan, some businesses are thinking about going public. A company’s name popularity and interest will rise if its assets are listed on the stock exchange, and it can also work to enhance its social trustworthiness.
Raising awareness will aid in the hiring of human resources and can offer a solution for businesses facing a crisis. For individuals who are concerned about raising money, listing stocks is also advised because marketing is diverse.
Small and medium-sized businesses are increasingly in need of obtaining support and fulfilling money or financial needs.
However, gathering material for an aid application can be challenging, and some people might discover it challenging to submit their application without the assistance of skilled professionals.
Also offers a range of business and management-related support. They offer business growing services, which include introducing firms to get new customers and suppliers, assisting in the creation of new goods, and presenting collaborating businesses to expand your business, in terms of advising and support services.
How to Apply for a Loan through SIDBI:
1. Consultant Preparation:
– Engage recognized consultants empanelled with SIDBI to prepare necessary documents, including a Basic Information Memorandum (BIM), containing essential information required for the loan application process.
2. Approval and Submission:
– The entrepreneur approves the BIM prepared by consultants, and it is then submitted to SIDBI for further processing.
3. Rating (if required):
– Depending on the case, the proposal may undergo rating by a Reserve Bank of India-approved rating agency.
4. Direct Handling by SIDBI:
– SIDBI directly handles certain cases:
– Equity or quasi-equity funding for growth-oriented existing units.
– Financing for service sector units.
– Credit for Cleaner Production Processes and Energy Efficiency initiatives in MSMEs.
5. Submission to Public-Sector Banks:
– For other cases, the loan application is submitted to Public-Sector Banks (PSBs) as per the memorandum of understanding (MOU) between SIDBI and PSBs for loan issuance.
6. Support and Assistance:
– SIDBI provides support and assistance throughout the loan processing stages, ensuring timely processing, capital raising, and minimizing unnecessary delays for MSMEs.
By following this process and leveraging SIDBI’s support, MSMEs can enhance their chances of securing loans efficiently and effectively to meet their financial requirements for growth and development.
Frequently Asked Questions (FAQs) about SIDBI:
1. What is SIDBI?
– SIDBI stands for Small Industries Development Bank of India. It is a financial institution established by the Government of India to cater to the financial needs of small and medium-sized enterprises (SMEs) in the country.
2. When was SIDBI established?
– SIDBI was established on April 2, 1990, through an act of Parliament with the objective of promoting, developing, and financing small-scale industries (SSIs) across India.
3. What are the main objectives of SIDBI?
– The main objectives of SIDBI include promoting and developing MSMEs, facilitating their access to finance, supporting their growth and expansion, and contributing to the overall economic development of the country.
4. Who is the Chairman of SIDBI?
– The current Chairman of SIDBI is Shri Sivasubramanian Raman. As the head of the institution, the Chairman provides strategic leadership and oversees the implementation of SIDBI’s initiatives and policies.
5. What are the finance facilities offered by SIDBI?
– SIDBI offers various finance facilities, including direct finance such as working capital assistance, term loan assistance, and equity support, as well as indirect finance through refinancing to Primary Lending Institutions (PLIs) and microfinance services.
6. How does SIDBI work?
– SIDBI works by identifying the financial needs of small businesses and providing them with specialized financial services and products. It collaborates with agencies, banks, and financial institutions to ensure that MSMEs receive the necessary support and assistance.
7. What are the functions of SIDBI?
– The functions of SIDBI include refinancing loans, bill discounting and rediscounting, expansion of marketing channels, provision of financial services like factoring and leasing, promotion of employment-oriented industries, modernization and technological upgradation, facilitation of credit flow, and co-promotion of state-level venture funds.
8. How can I apply for a loan through SIDBI?
– To apply for a loan through SIDBI, you can engage recognized consultants empanelled with SIDBI to prepare the necessary documents and submit them for processing. The loan application may undergo rating if required, and SIDBI directly handles certain cases while others are submitted to Public-Sector Banks (PSBs) as per the memorandum of understanding (MOU) between SIDBI and PSBs.
9. What are the benefits of availing finance from SIDBI?
– Some benefits of availing finance from SIDBI include a range of management assistance, lower obstacles to loan screening, low-interest rates, assistance for expanding businesses, and access to various business and management-related support services.
10. What are the different loan schemes offered by SIDBI?
– SIDBI offers various loan schemes tailored to the specific needs of MSMEs, including the SMILE scheme, Smile Equipment Finance, loans under partnership with OEMs, working capital assistance, SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED), SIDBI Term-Loan Assistance for Rooftop Solar PV Plants (STAR), and more. Each scheme has its own eligibility criteria and loan features.